Deals to on-demand startups fell to a two-and-a-half year low in Q4’16, continuing the contraction in activity from the category’s 2015 peak. On-demand startups globally attracted just 55 deals in Q4’16, compared to 78 deals the prior quarter and 116 deals in the peak quarter of Q3’15.
Funding dollars also fell by over 50% in Q4’16, to $1.7B from $3.7B in Q3’16. However, the category has managed to raise at least $1.5B every quarter since Q2’14. Before that pivotal quarter they never raised more than $500M.
We define the on-demand category as startups delivering physical goods and same-day services in an on-demand model. We do not include startups providing on-demand booking options for longer-term services, such as on-demand housecleaning.
Quarterly deals and dollars
On-demand startups attracted 55 investment deals in Q4’16 worth $1.7B in total. This represents a significant decline both from the prior quarter — which saw 78 deals worth $3.7B — and from the quarter’s peak in Q3’15, when the category saw 116 investment rounds totaling over $9B. On-demand deals and dollars had been steadily increasing from 2012 to 2015, but both dollars and deals have dropped in fits and starts starting in Q4’15.
The last quarter would have seen an even lower dollar total were it not for one monster deal that represented over 40% of Q4’16’s funding total: China Everbright Bank invested $743M into a new, Beijing-based ride-hailing company, Dingding Yueche. Dingding Yueche had not raised any previous funding.
Another on-demand rides startup, the Dubai-based Careem, had the quarter’s second-largest deal with a $350M Series D, boosting the company’s total funding to $422M. In the quarter’s third-largest deal, San Francisco-based on-demand delivery app Postmates raised a $141M Series E, bringing its total funding to $279M.
Q4’16 saw one additional $100M+ mega-round — a $105M Series C-II for JetSmarter, an on-demand platform for private jets, which brought together Jay-Z and the Saudi Royal Family (among others) as co-investors.
Annual deals and dollars
The 2016 funding total to on-demand was down 35% from 2015, while deals fell by 25% in the year, to 282 from the 2015 peak of 375.
In 2016 we saw several notably large deals: in Q2’16 Uber raised a $3.5B private equity investment from the Investment Fund of Saudi Arabia in the largest deal to a startup o record, followed by a $1B corporate minority investment by Didi Chuxing in Q3’16 (the latter deal was part of Uber’s complicated deal to sell its China division to Didi). Didi Chuxing itself also received a $1B injection from Apple in Q2’16.
Deals to on-demand startups peaked in the previous year with 375 deals worth $21.3B in total, a sum also driven by mega-deals to the global ride-sharing behemoths. Over the course of 2015, Uber raised a total of $5.1B, while Didi Chuxing raised over $3.7B. Chinese meal delivery startup Ele.me also raised over $2.2B across several deals in 2015, and AirBnB raised $1.6B.
Deal share by stage
The pattern in terms of deals’ stages points to a degree of maturation in on-demand, as the past five years have seen fewer early-stage deals and more deals to companies in the later stages. The share of deals to seed/angel startups declined from 53% in 2012 to 40% in 2016. Meanwhile, Series B to Series E+ rounds represented 18% of deals in 2012, but 30% of deals in 2016.
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